Tuesday, January 9, 2018

Congress Needs to Eat Its Spinach

The tax bill’s effective repeal of Obamacare’s individual mandate briefly reprised the “broccoli mandate”—whether, as Justice Antonin Scalia asked during Supreme Court oral arguments on Obamacare in March 2012, the federal government could compel individuals to purchase certain foods.

But instead of broccoli, spinach might serve as a more apt analogy, for the way the tax bill came to repeal the mandate demonstrates the ways Congress refuses to eat its policy spinach, following the path of least resistance in making easy choices rather than tough ones.

Avoiding Tough Choices on Taxes

Cotton said the “looks of hesitance and outright terror on the faces of my colleagues” convinced him that Republicans had to repeal the mandate as part of the tax package. Translation: Republicans thought it easier to obtain revenue from repealing the mandate than to weed out the tax code of popular tax breaks—the point of tax reform, which Republicans initially sold as a way to simplify the Internal Revenue Code.

Remember how Speaker of the House Paul Ryan (R-WI) sold tax reform as a way to allow Americans to complete their taxes on a postcard? That type of reform didn’t happen, because enacting that reform would have involved eliminating many more popular deductions than the final tax bill ended.

Revenue Neutrality and Spending

Another key point in the tax debate surrounded the issue of revenue neutrality. The “Better Way” platform released by House Republicans last year not only “envision[ed] tax reform that is revenue neutral,” it included a very clear standard for that metric: “House Republicans measure revenue neutrality by reference to a ‘current policy baseline’—i.e., achieving a level of federal revenues that is approximately $400 billion less over the ten-year [budgetary] window than the current law baseline.”

Congress may have valid justifications for reducing revenues, such as to increase economic growth, or to shrink the size of government. But the fact remains that, when faced with enacting a supposed “parade of horribles” to achieve a revenue-neutral tax bill, Congress chose to change the nature of the bill rather than to make the tough choices needed to achieve its original benchmark.

Likewise on spending reductions arising from the tax bill. Because the tax measure increased the federal deficit, the Statutory Pay-as-You-Go (PAYGO) act would normally require commensurate spending cuts offsetting the revenue loss. However, rather than allow these reductions to go into effect—or replacing the proverbial hatchet of automatic cuts with more targeted spending reductions—both Republicans and Democrats voted to exempt the tax bill from the PAYGO law, ducking another difficult choice.

Repeal Only Unpopular Parts of Obamacare

Repealing only Obamacare’s individual mandate—one of the most loathed parts of the 2010 health care law—echoes a problem Republicans faced during the “repeal-and-replace” debate last year: Many want to retain popular elements of the law, while repealing its unpopular features. Witness Republicans’ statements of support for keeping the status quo on pre-existing condition exclusions.

By repealing the unpopular parts of Obamacare but retaining the popular parts, Congress may have created an incoherent, and potentially unstable, policy that results in premium increases, infusions of taxpayer cash to “stabilize” markets, or both. Senate Republican leaders have already proposed the latter, precisely because they fear the political effects if the former occur.

Therein lies the problem with the congressional strategy: Avoiding tough choices generally only postpones them for a time—not forever. If insurers decide to leave markets after the mandate’s repeal takes effect in 2019, Congress will have to fix a problem it helped create. Likewise attempts by today’s Congress to reduce taxes, and not reduce spending, in shifting the blame to future generations.

At some point those bills will come due, so Congress might want to consider actually making some tough choices now, rather than creating even tougher choices in years to come.

This post was originally published at The Federalist.